Section 2 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The Industrial Relations Code, 2020 applies only where there is an "industry", an "industrial establishment or undertaking" or an "industrial dispute". Section 2(p), (q), (r) and (zo) define those terms and the related idea of an unfair labour practice. They decide who can go to a conciliation officer or Tribunal, and which establishments the lay-off, retrenchment and closure chapters reach.
An industry is any systematic activity carried on by co-operation between an employer and worker for producing, supplying or distributing goods or services to satisfy human wants, whether or not capital is invested or profit is the motive, but it excludes charitable institutions, sovereign functions of Government, domestic service and any activity the Central Government notifies (s.2(p)). An industrial dispute is a dispute connected with employment, non-employment, terms of employment or conditions of labour, and it includes an individual worker's dispute about discharge, dismissal, retrenchment or termination (s.2(q)). An unfair labour practice is one listed in the Second Schedule (s.2(zo)).
Industry (s.2(p))
The positive test
"Industry" means any systematic activity carried on by co-operation between an employer and worker, whether the worker is employed directly or by or through any agency including a contractor, for the production, supply or distribution of goods or services with a view to satisfy human wants or wishes. Wants or wishes that are merely spiritual or religious in nature do not count.
The definition adds two clarifications. It is an industry whether or not:
- any capital has been invested for the purpose; or
- the activity is carried on with a motive to make any gain or profit.
So a service business that invests little capital, or an activity run without a profit motive, can still be an industry if the core test is met. If you face a dispute where this is contested, our legal dispute resolution team can assess it.
What is excluded
| Excluded from "industry" | Text |
|---|---|
| Charitable institutions | Institutions owned or managed by organisations wholly or substantially engaged in any charitable, social or philanthropic service |
| Sovereign functions | Any activity of the appropriate Government relatable to its sovereign functions, including all activities of Central Government departments dealing with defence research, atomic energy and space |
| Domestic service | Any domestic service |
| Notified activities | Any other activity as may be notified by the Central Government |
The fourth exclusion means the list can grow by notification. Check for a current notification before treating a borderline activity as inside or outside the Code.
Industrial establishment or undertaking (s.2(r))
An industrial establishment or undertaking is an establishment or undertaking in which any industry is carried on. The proviso handles mixed operations, where several activities are carried on but only one or some are an industry:
- Severable unit (proviso (i)). If a unit that carries on an industry is severable from other units that neither carry on nor aid such an activity, that unit is deemed a separate industrial establishment or undertaking.
- Predominant activity (proviso (ii)). If the predominant activity (or each predominant activity) of the establishment or unit is an industry, and the other activities are not severable from it and exist to carry on or aid it, the entire establishment or unit is deemed an industrial establishment or undertaking.
Example. A hospital trust runs a pharmacy, a canteen and a medical college. Whether the whole is one industrial establishment, or only a severable part is, depends on proviso (i) and (ii) read against the charitable exclusion and the actual facts. The text gives the two tests; it does not decide the facts for you.
This definition matters because many obligations attach to "industrial establishments": the Grievance Redressal Committee threshold in section 4, the Works Committee in section 3, standing orders, and the lay-off, retrenchment and closure chapters.
Industrial dispute (s.2(q))
An industrial dispute means any dispute or difference:
- between employers and employers;
- between employers and workers; or
- between workers and workers,
which is connected with the employment or non-employment, or the terms of employment, or the conditions of labour, of any person. The wording "of any person" is wide: the dispute is about a person's employment or conditions, not only a worker's.
The individual dispute limb
The definition also includes any dispute or difference between an individual worker and an employer connected with, or arising out of, discharge, dismissal, retrenchment or termination of that worker. Section 4(9) reinforces this: where an employer discharges, dismisses, retrenches or otherwise terminates an individual worker, the dispute is deemed to be an industrial dispute even if no other worker and no Trade Union is a party. So one dismissed worker can raise an industrial dispute. The route runs through the Grievance Redressal Committee, then conciliation, then the Tribunal; see section 4.
Trade Union disputes are different
A dispute between Trade Unions, or between members of a Trade Union, is a "Trade Union dispute" under s.2(zm), and Chapter III has its own adjudication route for it. Do not confuse the two. Rule 9(8) of the Central Rules, 2026 sets out the application in Form-II to the Tribunal for such disputes in Central-sphere establishments, within one year from the date the dispute arises. State rules apply where the State is the appropriate Government.
Unfair labour practice (s.2(zo))
"Unfair labour practice" means any of the practices specified in the Second Schedule. Section 84 then says no employer or worker or Trade Union, whether registered under the Code or not, shall commit any unfair labour practice specified in the Second Schedule. Section 86(5) punishes a person who commits one with a fine of not less than ten thousand rupees and up to two lakh rupees. The Schedule has two parts: practices on the part of employers and trade unions of employers, and practices on the part of workers and trade unions of workers. Two separate articles in this cluster cover them: unfair labour practices by employers and by workers and Trade Unions.
Because the definition simply points to the Second Schedule, a practice not listed there is not an "unfair labour practice" under the Code, although it may still raise an industrial dispute.
Need help with a dispute or a classification question?
If you are deciding whether an activity is an "industry", whether a unit is a separate industrial establishment, or whether a termination has become an industrial dispute, our legal dispute resolution team can help you read the definitions against your facts. Keep the termination letter, appointment terms and any correspondence with the worker or union ready.
Key takeaways
- Industry is judged by systematic co-operation between employer and worker to produce or supply goods or services; capital and profit motive are not required.
- Charitable institutions, sovereign functions, domestic service and notified activities are excluded.
- Severable units and predominant activities are the two tests for mixed establishments.
- An individual worker's dismissal or retrenchment dispute is an industrial dispute (s.2(q) and s.4(9)).
- Unfair labour practices are only those listed in the Second Schedule.
Read next
- Definitions of employer, employee and worker
- Definitions of lay-off, closure, retrenchment, strike and lock-out
- Section 4: the Grievance Redressal Committee
- Industrial disputes under the new labour codes
Disclaimer: Based on the Industrial Relations Code, 2020 (as enacted) and, where noted, the Industrial Relations (Central) Rules, 2026 (G.S.R. 342(E), 8 May 2026), as on 30 September 2026. The Code is in force from 21 November 2025; some provisions may be notified later, and State Governments make their own rules for establishments where the State is the appropriate Government. Verify the current position before acting.